DEVELOPMENT AND LICENSE AGREEMENT

This DEVELOPMENT AND LICENSE AGREEMENT (the Agreement) is entered into as of December 19, 2002 (the Effective Date) by and among DURECT Corporation, a corporation organized and existing under the laws of Delaware and having its principal office at 10240 Bubb Road, Cupertino, California 95014, and Southern BioSystems, Inc., (SBS) a corporation organized and existing under the laws of Alabama and having its principal office at 756 Tom Martin Drive, Birmingham, Alabama 35211, a wholly-owned subsidiary of DURECT Corporation (DURECT Corporation and SBS together, DURECT), and Pain Therapeutics, Inc., a corporation organized and existing under the laws of Delaware and having its principal office at 416 Browning Way, South San Francisco, CA 94080, (PTI) (DURECT and PTI hereinafter to be collectively referred to as the Parties and singularly as a Party).

RECITALS

WHEREAS, DURECT is engaged in the research, development and manufacture of controlled-release drug delivery products;

WHEREAS, PTI is engaged in the research, development and commercialization of opioid pharmaceutical products;

WHEREAS, DURECT possesses the right to license proprietary rights to a controlled-release technology that uses a high-viscosity base component to provide controlled release of active ingredients known as the SABER Delivery System (as defined herein below);

WHEREAS, the Parties to this Agreement desire to collaborate in the development of specified oral controlled-release opioid products based on the SABER Delivery System; and

WHEREAS DURECT wishes to license certain of such proprietary rights to the SABER Delivery System to PTI so that PTI may develop and commercialize such products.

NOW, THEREFORE, for and in consideration of the foregoing premises and the mutual covenants set forth herein and other valuable consideration, it is agreed by and between the Parties as follows:

ARTICLE I

DEFINITIONS

For the purposes of this Agreement, the following words and phrases, whether used in the singular or plural, shall have the following meanings:

1.1 Accounting Period means a calendar quarter commencing on the first day of an Accounting Period, respectively January 1, April 1, July 1 and October 1, each being the first day, and finishing on the last day of an Accounting Period, respectively March 31, June 30, September 30 and December 31, each being the last day.

1.2 Act means the Federal Food, Drug and Cosmetic Act, 21 U.S.C. 301 et seq., as such may be amended from time to time.

1.3 Acquiror has the meaning set forth in Section 17.1.

1.4 Active Ingredient means any pharmaceutically or pharmacologically active agent or compound alone or in combination with other components, other than a Controlled Release Carrier.

1.5 Affiliate means any corporation or other business entity, which controls, is controlled by or is under common control with a Party. For purposes of this definition, control means, as of or subsequent to the Effective Date, direct or indirect ownership of more than fifty percent (50%) of the voting interest or income interest in a corporation or business entity.

1.6 Antagonist means one or more (either alone or together) of any opioid receptor antagonist, including [* * *].

1.7 Bulk Dosage Form has the meaning set forth in Section 5.1(a).

1.8 Business Day means a day on which banks are open for business in San Francisco, California.

1.9 Change of Control has the meaning set forth in Section 4.3.

1.10 Clinical Program has the meaning set forth in Section 3.1

1.11 Clinical Program Milestone means an event relating to the clinical development of the Licensed Product as defined in Section 3.2.

1.12 Commercialize or Commercialization means all ongoing processes and activities generally engaged in by a company marketing pharmaceutical products to establish and maintain a presence and sales for an ethical pharmaceutical product in a particular market, including, but not limited to offering for sale, selling, marketing, promoting, distributing and importing such product.

1.13 Competing Product has the meaning set forth in Section 8.4(c).

1.14 Confidential Information has the meaning set forth in Section 13.1.

1.15 Controlled Release Carrier means one or more molecules, particles, and/or other formulants that are physically and/or chemically associated with the Active Ingredient(s) and that are capable of achieving the controlled release of the Active Ingredient(s) to which they are physically and/or chemically associated (i.e., such Active Ingredient(s) is released and pharmacologically available in the system of a recipient), in each case, as a result of the physical and/or chemical

* * * Certain information on this page has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been granted with respect to the omitted portions.

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